Last updated: 12:41 / Friday, 22 May 2020
73rd annual CFA Institute conference

Howard S Marks Believes That a Good Investor is Confident in His Views, And His Are All About Distressed Assets

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  • Oaktree Capital Management is now trying to raise $15 billion for what would be the biggest-ever fund to invest in distressed debt
  • Marks: "The market is what it is, rates, and the return environment is what it is, so superior investors control their emotions to deviate from the herd and outperform"
  • He believes that today's, is a market which is artificially supported by Fed buying, so he expects plenty of debt defaults and bankruptcies when corporate borrowers start running out of cash in the months ahead

In order to be a good investor you have to be confident in your views says Howard S Marks from Oaktree Capital Management.

In the 1980s, he became one of the first investors to specialize in beaten-down bonds. He is now trying to raise $15 billion for what would be the biggest-ever fund to invest in distressed debt. He is also raising a separate $3.5 billion fund designated for underwater real estate assets.

During the 73rd annual CFA Institute conference, he also mentioned that in this environment, where returns will be lower for longer, the secret to prevailing is to produce better returns than your peers. "The market is what it is, rates, and the return environment is what it is, so superior investors control their emotions to deviate from the herd and outperform."

 The billionaire contrarian investor reminded the viewers that "in order to combat the virus we put the economy into a deep freeze... Investors are not experts on the virus, we are just taking ideas from experts which you have to pick according to your bias, but all are cautious to varying degrees."

Although he agrees with Mr Powell in that extreme and unprecedented actions are called for, he is also aware that stocks and bonds are selling at prices they wouldn’t sell at if the Fed were not the dominant force.

More than once he has quoted that “capitalism without bankruptcy is like Catholicism without hell” and he believes that today's, is a market which is artificially supported by Fed buying, so he expects plenty of debt defaults and bankruptcies when corporate borrowers start running out of cash in the months ahead.

Marks is not alone, according to Preqin, as of mid-May , distressed real estate funds have already accumulated nearly $10 billion worth of dry powder, waiting to invest once the Fed inevitably steps back.

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